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Increased Tax Disclosures and Corporate Tax Avoidance

Erin Henry, Norman Massel, and Erin Towery

Abstract:

This paper examines whether three recent mandatory tax disclosure regimes (Schedule M-3, FIN 48, and Schedule UTP) are associated with long-term changes in corporate tax avoidance. We find that both the Schedule M-3 and Schedule UTP disclosure regimes are associated with increased levels of tax avoidance while the FIN 48 disclosure regime is associated with decreased levels of tax avoidance. We also posit that these associations could differ for domestic and multinational firms because of the specific information required within each disclosure. We find that the increased tax avoidance associated with Schedule M-3 and Schedule UTP is stronger for domestic firms than for multinational firms. The decreased tax avoidance associated with FIN 48 is also stronger for domestic firms than for multinational firms.

Citation

Erin Henry, Norman Massel, and Erin Towery (2016), Increased Tax Disclosures and Corporate Tax Avoidance, National Tax Journal, 69:4, pp. 809-830

DOI: doi.org/10.17310/ntj.2016.4.04